NYC Real Estate Expert Unpacks Challenges of Distressed Property Negotiations

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Date:

22 Aug 2025

The path to acquiring distressed properties in New York City involves far more than just negotiating with banks, according to Sean Sedaghatpour, Principal of Elisheva Realty. He says success requires navigating a complex web of city agencies, violations, and regulatory requirements that can make or break a deal.

The Hidden Regulatory Hurdles

“In New York, for sure, there’s a lot of risk with HPD and some of the other government agencies where their violations become liens,” Sedaghatpour explains. This creates a complex dynamic where regulatory compliance becomes as crucial as financial considerations.

According to Sedaghatpour, these regulatory challenges can dramatically impact property economics. “If you’re the bank and you don’t know how to operate these properties really, really well, and let’s say the property has hundreds and hundreds of violations on it, the next thing you know, there’s a $750,000 lien,” he says, noting how these liens can take priority over existing debt through tax assessments.

The City Vetting Process

Perhaps most critically, Sedaghatpour emphasizes that successful acquisitions require pre-approval from city authorities. “Part of your due diligence is to, if you have the contacts, go to the city and say, ‘Hi, it’s me again. I understand these are the problems, and this is what we’re going to do to turn it around.'”

This vetting process goes beyond simple paperwork. “You need the bank to know that you have the ability to not only close, but to execute, because a lot of this stuff requires the city vetting you. The city has to agree to put their guns down,” Sedaghatpour explains.

The Importance of Reputation

Reputation with city agencies can make or break potential deals. “You need to be in a position for them to say, ‘Good, we’re excited to work with you,'” Sedaghatpour notes. He contrasts this with less experienced or reputable buyers: “If they come and they say, ‘Oh, we know that you’re a slumlord in the making,’ that’s another layer of it. It’s not just the pro forma, it’s not just the numbers.”

Building Credibility

For investors looking to enter this market, Sedaghatpour suggests that building credibility with regulatory authorities is as important as having capital. “You really need to be an expert to know how to take title,” he says, whether dealing with short sales or debt purchases.

This expertise becomes particularly crucial when dealing with severely distressed properties. “A lot of the times, it’s so bad that the deed owner is willing to just essentially hand the keys, and the bank is saying, we don’t even want to touch the keys,” Sedaghatpour explains.

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